I want to remind you about the importance of taking advantage of the Experience Rating Adjustment (ERA) factor offered in Illinois.

I'm working with a potential client on ways to help control their Workers Compensation insurance expense. The incidents on the Specific Loss Report shown below are actual claims on the Experience Mod of a Chicago, Illinois business.

The report below shows the effect of three claims on the Experience Mod and the additional premium projected (for the three years that it affects the Mod):

1.) A large loss ($113,256). Kind of what you might expect from the mechanics of an insurance policy. The company gets hit with a loss and your premium is affected with paying a surcharge. In this case the three year cost is $28,266 with a 17% effect on the workers compensation experience mod.

2.) A small claim ($2,883) that included “indemnity”. Indemnity is basically disability payments for time off for the injured worker. This employee sprained his ankle. Take a peek at the three year claim cost…Yep!! $5,519. The Insurance Company actually profits on this one.

3.) A second small claim ($2,083). This claim was medical only with no “indemnity” paid. As you can see, the three year cost on this claim is $1,206.

The reason for the big difference between 2 and 3? Experience Rating Adjustment (ERA) factor. Only 70% of the claim cost is used in the experience modification calculation for Medical Only Claims. The purpose of which is to encourage businesses to report small claims.

Going back to our employee that sprained his ankle - what type of work could you have him do around the office, even though his ankle is sprained, so that his days "off" don't rack up your Experience Mod?

Do you think you might have some safety manuals he could read or better yet maybe even wash a truck or two?

From the report, this claim affected the mod by 3.35%. What if the mod for this business was floating in the 1.00 area?

On a side note - If this example involved a contractor, this 3.35% could have disqualified the contractor from the Contractor Classification Premium Adjustment Program (CCPAP). These credits can be 40% of the Workers Compensation premium.